Report says Icahn has built big stake in retailer JC Penney

Published 6:00 pm, Thursday, January 31, 2008

Shares of J.C. Penney Co. rose 2.4 percent Friday on a published report that activist billionaire investor Carl Icahn has quietly amassed a big stake in the department store operator.

The Wall Street Journal, citing people familiar with the matter, reported on its Web site Friday that Penney is now among Icahn's five largest holdings, which could place it in the hundreds of millions of dollars.

Icahn's office did not immediately respond to a request for comment. Penney said it "does not comment on rumors or speculation."

Penney shares gained $1.15 to $48.50. They have slumped by nearly 45 percent since early last year as the Middle American department store chain has grappled with slower sales growth.

The company's third-quarter profit fell 9 percent, and the company lowered its outlook for fourth-quarter profit.

After raising same-store sales faster than most of its rivals for a long time, Penney's same-store sales fell 3.5 percent in the third quarter. The decline grew worse in December, when its sales at stores open at least one year tumbled 7.5 percent.

Other department store chains also reported weak December sales. Penney's Chairman and Chief Executive Myron E. "Mike" Ullman III has said the disappointing sales were the result of a slowing economy, higher gasoline prices that have left consumers with less to spend in stores, and the housing market slump, which has hurt sales of home goods.

Penney operates about 1,080 stores and also generates more than $1 billion in annual sales from its Web site. In its last full fiscal year, it had sales of $19.9 billion.

Last month, Icahn attended a retail industry conference and sat a few feet away while Ullman and other CEOs discussed their business.

Icahn said retailers are an attractive investment because their stocks have been pounded lately. But he also warned that with economic uncertainty, the stocks could sink further before improving.

Icahn is an activist shareholder who led a successful fight to win a seat on the board of Plano-based Penney's neighbor, movie-rental giant Blockbuster Inc., whose chairman and chief executive left soon afterward.

He has also pushed for changes in recent years as a shareholder at other companies, including Time Warner Inc. and Motorola Inc. On Friday, he named four nominees for seats on the board at Motorola, where he lost a proxy fight last year.